A new IP dawn for Microsoft?

Whereas being most definitely one of USA's patent champions with 3,094 patents awarded in 2010 (in 3rd position behind IBM and Samsung), Microsoft is not making the IP headlines as much as its US counterparts such as Google - in the midst of acquiring Motorola Mobility which is now being sued by Intellectual Ventures, or Apple - embarked in an all-out and global patent war against all its competitors on the smarphone market with Samsung as primary target. However two interesting item of news are revealing that this situation might be about to change.

On September 29th Microsoft announced in a press statement a landmark agreement with Samsung 'to cross-license the patent portfolios of both companies, providing broad coverage for each company’s products'. Given the current difficulties encountered by South-Korea's top smartphone seller to launch its products quickly (if at all) on various markets all around the world notably in Germany, the Netherlands and in Australia, such an agreement will certainly provide Samsung with the necessary patent ammunition against its newfound archenemy Apple, while bringing a large amount of money in the bank accounts of the Redmond-based corporation. Well-informed Joff Wild of IAM Magazine speaks of a royalty-based deal ranging from 10$ to 15$ per android device sold. Moreover the announcement also reports the cooperation of Samsung in the development and marketing of Windows Phone, whose latest OS version called Mango received very encouraging critics.

More interesting is another piece of news published on IAM Magazine's blog which reveals that Microsoft hired Florian Mueller to conduct a research on standard-essential/FRAND-related patents. The unorthodox choice of well-known anti-software patents activist Florian Mueller to perform such a research certainly demonstrates Microsoft's keen awareness that negotiating in fair and reasonable terms with all its competitors will help the company exploiting its heavy patent porfolio at its full potential, instead of using it primarily as defensive leverage.

Microsoft active patent licensing strategy could be another sign showing that 'IP really starts taking centre stage in corporate thinking' as many IP licensing specialists start believing after the groundbreaking Nortel patent auction...

Apple now top dog on US stock market

It's intriguing to see the neck and neck race between electronic company Apple and oil company Exxon Mobil for the top dog position on the US stock market. A race between Apple's intellectual property and the raw materials of Exxon Mobil. It's true that ExxonMobil also has a large amount of patents on the extraction and production of fuels. Apple's IP position seems to be much wider comprising not only patent protection, but also software and probably equally valuable: design protection. The German Handelsblatt commented in an article today: Elektronik-Riesen: Apple stößt Exxon Mobil vom Börsen-Thron - Aktien - Finanzen - Handelsblatt
(German only). The price of the ExxonMobil shares follows broadly the oil price which suggested that stock analysts clearly use that indicator as the main element of value in Exxon Mobile.

On the other hand the article concludes that Apple's share price has a long way to go.

This author has been looking at Apple for some time. The company is filing a significant number of patents - not yet as many as IBM or Microsoft. The company is also becoming highly litigious in defending its rights.

Not only is Apple actively defending its patents but its injunction against Samsung based on design rights (see the FOSS blog report here and commented by our friendly Kats here) shows Apple's interest in retaining its rights to its "look and feel".

Anyone with a penchant for numbers can have goggle at the 10Q filing available here. Revenue from "other music-related products and service - in other words iTunes, the App Store and the iBookstore" rose 29% in the three months ending 25 June compared to the previous year and is now 5% of net sales. The cost of sales must be minimal which presumably means that the USD 1.5 Million generated in three months represents substantially profit based on intellectual property.

Based on all revenue and cost of sales, Apple is reporting a gross margin of 41.7% up slightly from the comparative period in the previous year. And what about our oil friends. The 31 March 2011 accounts show consolidated gross revenue of USD 114,004 million and net income of USD 10,650 million - a substantially lower marging which no doubt reflects the fixed costs associated with oil production.

So what does this tell us. An IP-rich business such as Apple has a much higher margin and this is now being reflected in its stock price. It does not come as a surprise for Apple fans to see their favourite company .

South Korea's Deficit in Patent Royalty Payments

The Korean firm of C&S Patent has just sent around its regular newsletter which included a reference to a report by The Bank of Korea in which , the amount of royalties that S. Korean companies paid as fees to "access intellectual property rights" (presumably as royalties) in 2010 was a total of 5.8 billion dollars. This was apparently an increase of approximately 2 billion dollars as compared to the figure of 3.9 billion dollars paid out in 2009 and compares to 2.6 billion dollars paid as royalties in 2006.

C&S Patent report this in the context of a licensing payment of 550 million dollars from  Samsung Electronics to Kodak and 400 million dollars from LG Electronics for the use of a patent relating to mobile phone imaging technologies (reported here). This patent has now been held by the US International Trade Commission as being invalid (although Kodak announced that they are appealing the case).

Whatever the merits of the Kodak patent, the case shows the effect that royalty payments can have on the balance of payments of a country. It's no wonder that many national governments in Asia are encouraging their domestic companies to become more active in formulating standards and also to patent aspects of those standards.